How North Korea Uses Slave Labor Exports to Circumvent Sanctions

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Military.comBy Joseph V. Micallef

Joseph V. Micallef is a best-selling military history and world affairs author, and keynote speaker. Follow him on Twitter@JosephVMicallef.

Of all the egregious forms of modern day slavery, none is more despicable or far reaching than the export of slave labor by North Korea. It's estimated that North Korean slave labor is utilized in over 45 countries around the world, including in the European Union, and entails the exploitation of between 100,000 and 200,000 individuals. The government of North Korea and various affiliated organizations "earn" an estimated two to three billion dollars yearly from the exploitation of its citizens as slave labor. As economic sanctions have bitten deeper into North Korea's economy, Pyongyang has responded by steadily increasing the number of laborers it exports.

Starting in the 1980s, Kim Jong-il formed two agencies in the Korean Workers Party (KWP), Office 38 and Office 39, to create and manage various foreign businesses, including the provision of labor to overseas companies. The funds generated from these operations were earmarked for North Korea's nuclear weapons development program.

At the same time, Pyongyang loosened its monopoly on foreign trade and allowed various government departments, starting with the military, to undertake their own trading operations and to secure their own sources of hard currency. Access to hard currencies is highly coveted and ensures its participants access to Western goods and a very comfortable lifestyle. The Kim family has used such access to reward its supporters.

Currently, there are around 14 organizations from the KWP, government and military that conduct foreign trade and earn hard currencies in North Korea. Their activities are centered around five North Korean banks that are used to repatriate and hold foreign currency accounts: Joseon Trade Bank (Cabinet/National Planning Commission), Southeast Asia Bank (government/military), Chang-Kwang Credit Bank (Ministry of Industry), Dae-Sung Bank (Office 39) and Koryo Bank (Office 38). Each bank administers the financial activities for one or more of the organizations that engage in foreign trade.

In addition to their trade activity, these various organizations also operate hotels, Korean themed restaurants and gift stores selling traditional crafts, principally in China and Russia, all of which are staffed by North Korean laborers. They also operate tourism facilities in North Korea. In addition, all these organizations engage in the export of North Korean workers.

The KWP Office 39, for example, administers seventeen foreign branches and 100 different trading companies. This office is also responsible for North Korea's exports of gold bullion, about a ton a year, and overseas North Korea's foreign currency counterfeiting. It is also believed to engage in some drug trafficking and arms sales as well as labor export. Western intelligence agencies estimate that Office 39 generates between 500 million and one billion dollars a year in revenue. Funds are earmarked for Pyongyang's nuclear program and, it is believed, the personal use of Kim Jong-un. According to a recent US-South Korea joint government investigation, it's estimated that Office 39 controls around five billion dollars in assets worldwide.

Since coming to power in 2012, Kim Jong-un has overseen a significant rise in the export of North Korean labor. Currently it is estimated that Korean laborers overseas have increased from around 65,000 in 2000, to between 100,000 and 200,000 workers currently. Typically, these workers only receive about 10 to 20 percent of their designated wages. All wages of foreign workers are paid directly to the North Korean companies overseeing the activity and they in turn pay the North Korean workers.

The export of labor generates between two and three billion dollars yearly for the various North Korean organizations involved in it. The exact number is unclear as foreign firms, typically in India, Pakistan and Bangladesh, are sometimes used to place the workers and they in turn take a commission of anywhere from 10 to 15 percent. The banks themselves charge various fees for administering the activity. In addition, the North Korean government levies taxes on the proceeds. It's not clear if this estimate includes the profits from North Korean owned firms overseas that utilize North Korean slave labor. Finally, some portion of the proceeds are probably kick backed to Dear Leader Kim Jong-un in return for the right to engage in trade activities.

The export of slave labor is in addition to the roughly 100,000 to 200,000 inmates in various types of prison labor camps inside North Korea. These consist of large internment camps for political prisoners (Kwan-li-so) and reeducation prison camps (Kyo-hwa-so). These laborers are also used as slave labor in a range of activities from gold and coal mining to farming and manufacturing. Some of the products produced at these labor camps are in turn exported to China by various state organizations.

In a chilling parallel to Nazi Germany's concentration camps, some of the larger prison camps have added crematorium to dispose of the bodies of prisoners that die while they are incarcerated. It's estimated that around 20% of prisoners die within their first year of incarceration and that roughly half of all prisoners do not survive their imprisonment. The hellish living conditions inside North Korea and inside the labor camps has been extensively documented, most recently in an exhaustive UN report.

In recent years, North Korea has run deficits of between one billion and 350 million dollars in its foreign trade. Without the earnings from the export of labor, it's likely that North Korea would undergo the same cash squeeze it experienced in the 1990s and possibly collapse.

There is some question, however, on how reliable these trade statistics are. Over 90 percent of North Korea's exports are to China. The accuracy of China's reporting has a significant impact on the reported deficit. In February of 2017, for example, Beijing announced that it was suspending imports of North Korean anthracite coal. Reported shipments declined in April, but as of June appeared to be back to historical levels.

Currently North Korean laborers are working in around 45 countries. The bulk of the workers are in China, Russia and the Persian Gulf emirates. Its estimated that there are approximately 50,000 Korean workers in China, some of which are employed in firms owned by various North Korean agencies. Labor shortages in China, especially in the northeast, have often been filled by North Korean workers.

There are roughly 25,000 North Korean workers in Russia, mostly in the timber industry in eastern Siberia and in the construction industry in western Russia. There are about 20,000 workers in the Middle East, mostly in construction and medical related fields. There are 15,000 workers in Southeast Asia, around 10,000 in Africa and 5,000 each in Europe and Mongolia.

Workers are not always identifiable as North Koreans, especially when they are part of mixed nationality labor battalions that were organized by third party, foreign firms. It's likely that the actual number per country is much higher.

Work conditions are typically spartan. In many places workers are housed six to eight to a room and usually work 60-80 hour weeks. North Korean workers employed in the construction of the Zenit Arena, the venue for the 2018 World Cup in St. Petersburg, were reportedly housed eight to a 20 by eight-foot shipping container. Average salaries vary by country. They are higher in the Gulf, lower in China and Russia. On average, they are around 300 to 400 dollars a month. Workers receive between 10 and 20 percent of their official wage and the balance is retained by the North Korean agency that organized the labor export and its various intermediaries.

Is this slavery? As brutal as it appears, for some, sadly, it is in fact a better quality of life than what is found in North Korea. Most workers acknowledge that they are better fed and have better medical care than their countrymen. In fact, North Koreans often bribe government officials to become overseas laborers. The going rate is 200 to 700 dollars. Moreover, once abroad, workers can work on the side for their own benefit or even operate a business. Many workers engage in trading activities, some of which, like the sale of black market cigarettes and other contraband, are often supplied by the local North Korean embassy.

In addition, in a new and even darker chapter, Pyongyang has supplied North Korean women to traffickers who smuggle them across the border and sell them as brides to Korean-Chinese, (Chosun Jok, a Chinese citizen of Korean descent) in northeast China. There have also been persistent reports, but no hard evidence yet, that North Korea has supplied North Korean women to various criminal gangs in Eastern Europe for use in the sex trade. There are long standing ties between Pyongyang and Russian criminal organizations.

Putting aside the obvious question of whether Pyongyang's export of labor constitutes a form of slavery, there are three issues to consider.

First, the export of labor allows North Korea to earn billions of dollars in hard currency. These earnings play an important role in funding North Korea's nuclear weapons development program and are critical in keeping the Kim family and its cronies in power. Labor exports also allow Pyongyang to circumvent the effect of economic sanctions on its international trade. As sanctions have bitten deeper, Kim Jong-un has responded by simply increasing the number of workers that North Korea exports. Without the hard currency earned from labor exports, it's likely that the North Korean economy would collapse.

Secondly, the export of labor in North Korea has created an environment where the coercion and exploitation of forced labor has become an accepted part of North Korean life. Many schools, for example, have imposed fees on their students. Students, some as young as five, are forced to work in lieu of making the cash payments or as a "team building" exercise.

The workers' paradise of North Korea increasingly resembles a medieval society where each layer of society is exploited by its superiors by being forced to provide free labor. Clearly, there is no degradation that Pyongyang will not impose on its citizens in its quest for ever larger amounts of hard currency, a practice that is increasingly spreading throughout North Korean society. In what some legal scholars have described as "criminal sovereignty," the government of North Korea seems little different from an international criminal cartel; albeit one armed with nuclear weapons.

Finally, North Korea's exploitation of its workers could not occur without the acquiescence of the West. In many cases, the actual use of such workers is not obvious. On the other hand, there are numerous instances where the use of North Korean labor has been open and well documented. The use of North Korean labor in Polish shipyards or the Czech Republic is well known. Both the new stadiums being built to host the World Cup in St. Petersburg (2018) and in Qatar (2022) are being constructed with the use of North Korean slave labor.

Hundreds of thousands of World Cup fans will buy tickets to sit in stadiums built with slave labor. International broadcasters will each pay hundreds of millions of dollars to televise games from those same stadiums. Where is the outrage from the West? Why hasn't any Western government demanded that FIFA either cancel or reschedule the World Cup to venues that are untainted by the use of slave labor?

Given that the proceeds of labor exports function to circumvent the intent of economic sanctions against North Korea and that the funds it generates helps to fund North Korea's nuclear weapons development program, it is essential that labor exports be included in the sanctions levied against North Korea. Ditto for tourism into North Korea.

Moreover, the five North Korean banks at the center of the slave labor exports need to be completely cut off from the international banking system and any financial institution that acts as an intermediary for them needs to be subject to sanctions itself. Without the ability to move funds, the export of North Korean labor would yield little profit to Kim Jong-un and his cronies.

Not only is the countenance of North Korea's labor exports a tacit acceptance of the continuation of slavery in the 21st century, but it directly leads to a major source of global nuclear proliferation and regional instability. It's time to put a stop to Pyongyang's brutal exploitation of its citizens.

(Editor’s Note: A previous version of this column incorrectly stated that the North Korean banks were still part of the SWIFT Network of financial institutions.)

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